OnDeck vs. Kabbage: Which Lender Is Better for Your Small Business?

OnDeck vs. Kabbage: Which Lender Is Better for Your Small Business?

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If you’ve been wondering what the difference is between Kabbage and OnDeck, we’ve analyzed, compared and contrasted the two lenders. In general, OnDeck is a better choice for businesses looking for a term loan or for borrowers that want to establish a long-term relationship with their lender. On the other hand, we recommend Kabbage for borrowers that want a line of credit, especially if they have a lower credit score or lower revenue business.

OnDeck vs. Kabbage Summary

In the table below, we compared OnDeck and Kabbage based on each lender’s eligibility criteria, products offered, rates, fees and terms Generally speaking, we recommend OnDeck for term loans, especially if you want a longer term or more than $150,000, and for borrowers looking to take out more than one loan. Kabbage is a better choice for a line of credit or for businesses with lower annual revenue and business owners with credit scores under 600.

Better for
  • Term loans
  • Large loans or long terms
  • Lower APRs
  • Repeat customers
  • Line of credit
  • Lower revenue businesses
  • Credit scores under 600
  • Monthly repayment
Minimum Age of Business12 months12 months
Minimum Annual Revenue$100,000 in annual revenue$50,000 in annual revenue
Minimum Credit Score600None
Personal GuaranteeYesNo
Other RequirementsNoneNone
Products Offered
  • Business loan
  • Line of credit
Line of credit
Loan Amount Range
  • Loan: $5,000 - $500,000
  • Line of credit: $6,000 - $100,000
$2,000 - $250,000
APR Range
  • Loan: 9.30% - 99.70%
  • Line of credit: 13.99% - 39.90%
20.00% - 80.00%
Loan Terms
  • Loan: 3 - 36 months
  • Line of credit: 6 months
6, 12 or 18 months
Repayment OptionsDaily or weeklyMonthly
Prepayment PenaltyNoNo
Funding TimeAs fast as one business dayAs fast as same day
Apply NowApply at OnDeckApply at Kabbage

When to Use OnDeck Over Kabbage

OnDeck is a better option than Kabbage if:

  • You want a term loan instead of a line of credit
  • You want a large loan or longer terms
  • You can qualify for a low APR
  • You plan on taking out multiple loans

Kabbage doesn’t offer term loans, so OnDeck is your only choice between the two lenders for a traditional term loan. With that in mind, we also recommend OnDeck if you want more than $150,000 or want longer terms up to three years. OnDeck has two loan products: a business term loan and a line of credit. Business loans are offered in amounts up to $500,000 with terms from three months to three years. Rates on business loans start in the low single digits, though the average annual percentage rate (APR) in 2016 was 42.1%. If you want a line of credit, OnDeck only extends lines of credit up to $100,000 with six-month terms. For comparison, Kabbage provides lines up to $150,000 with six- or 12-month terms. APRs on OnDeck lines of credit vary from 13.99% to 39.9%, with the average APR being 33.1% in 2016.

Another reason we would recommend OnDeck over Kabbage is if you can qualify for a low annual percentage rate. APRs start in the single digits on term loans and 13.99% on lines of credit at OnDeck. On the other hand, APRs at Kabbage start at 20%. Let’s consider an example using a $75,000 three-year loan. With an APR of 6%, you would pay back a total of $82,139. If the APR was 20%, instead, you would pay back $100,341. That’s a difference of over $18,000. For this reason, we recommend applying at OnDeck if you believe you can get a rate under 20%. This is more likely to happen if you have an excellent credit score and a financially healthy business.

Finally, we think OnDeck is a good choice for borrowers looking to establish a relationship with their lender. If you take out more than one loan in good standing, the lender will reduce the origination fee and potentially even your interest rate. For instance, on your first loan with OnDeck, the origination fee will be between 2.5% and 4% of the loan amount. However, by your second loan, the origination fee will be between 1.25% to 3%, and by your third or subsequent loan, the origination fee will be between 0% to 3%.

When to Use Kabbage Over OnDeck

Kabbage is a better option than OnDeck if:

  • You want a line of credit
  • Your business has annual revenue between $50,000 and $100,000
  • You have a credit score under 600
  • You want a monthly repayment schedule

We recommend Kabbage if you want a line of credit, particularly if you have a lower credit score or your business has low annual revenue. Not only does Kabbage offer larger lines of credit and more terms, the requirements to qualify for lines up to $100,000 are more lenient than those at OnDeck. You can take out a line of credit up to $150,000 with terms of six or 12 months with Kabbage. OnDeck, for comparison, only has lines up to $100,000 with six-month terms. To qualify at for up to $100,000 at Kabbage, your business must be at least one year old with $50,000 in annual revenue (for lines above $100,000, you'll need to be in business three years with $500,000 in annual revenue). In comparison, qualifying for a line of credit up to $100,000 at OnDeck requires higher annual revenue and a minimum credit score of 500. This is why we recommend Kabbage for borrowers with lower credit scores and for lower revenue businesses.

Unlike OnDeck, Kabbage requires monthly repayment on its line of credit. Depending on your business’s cash flow cycle, this may be better than making the daily or weekly repayment that OnDeck requires. However, because of the way Kabbage loans are constructed, you will pay more the first two months (and this also means you won’t save as much paying early). Let’s say you decide to take out a $30,000 line of credit with a six-month term. Every month your principal payment will be $5,000. In first two months, your fee is 3%, so you would pay $900 in interest. For the remaining four months, your fee might be 1%, meaning you would pay $300 in interest. Your payments would be $5,900 for the first two months and $5,300 for the last four months.

How to Choose Between OnDeck and Kabbage

First, make sure you meet the minimum eligibility criteria at both lenders before you apply. Since applying for a business loan will mean a hard pull on your personal credit report, it’s best to avoid this unless you’re likely to be approved. Both lenders are upfront about what it takes to qualify by listing time in business, revenue, credit and other requirements. Second, consider whether you need a term loan or line of credit and how much you need. Term loans are generally better for long-term investments in your business, such as equipment purchases, business acquisition or expansion. On the other hand, lines of credit make more sense for ongoing purchases, working capital needs or cash flow issues.

If you apply and are approved for a loan, carefully review the loan contract before agreeing. You should know how much it will cost you to borrow this money (i.e., how much you will repay in total -- what’s known as the total cost of capital), when you will repay and whether the loan is amortized or not. Read the contract to also understand any stipulations about how you can use the money, what constitutes a late payment, what extra fees you may be charged, how much you may need to personally guarantee and any other issues. Before you commit to a loan, you should know exactly what you are getting yourself into, and furthermore, don’t be afraid to negotiate the contract with the lender. You can negotiate how much you are willing to personally guarantee, what kind of collateral you will put up and numerous other items.

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Justin is a Sr. Research Analyst at ValuePenguin, focusing on small business lending. He was a corporate strategy associate at IBM.

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.